City gives mayor authority to negotiate hotel deal, but some residents disagree

Wednesday

Apr 10, 2013 at 12:01 AM

TUSCALOOSA | A unanimous vote of the City Council on Tuesday gave Mayor Walt Maddox the authority to negotiate additional economic incentives for the developers of a proposed downtown hotel at the corner of Greensboro Avenue and University Boulevard.

By Jason MortonStaff Writer

TUSCALOOSA | A unanimous vote of the City Council on Tuesday gave Mayor Walt Maddox the authority to negotiate additional economic incentives for the developers of a proposed downtown hotel at the corner of Greensboro Avenue and University Boulevard.The vote also gave Maddox the authority to finalize an agreement with the development firm, Kemmons Wilson of Memphis, Tenn., without a final vote of the City Council. However, the mayor said he would keep the council informed of any agreements. Additionally, the council retains veto power over any agreement the developer and the mayor may reach.“If we don’t do this, the policy question going forward is what do we want to see on that property?” Maddox said.Maddox said the property had been contributing no taxes or jobs to the local economy since the 1980s, when the city used Community Development Block Grant funds to purchase the land for a possible downtown hotel.Should this deal fall apart, the site could be open to a lesser-scale motel or student-based housing, the mayor said.At issue is a request from Kemmons Wilson to modify an existing economic incentives package because of unexpected site preparation and construction material costs.Maddox said the company has made no specific requests and that he expects it will shortly.A local hotel operator voiced her concerns about the incentives to the City Council prior to Tuesday night’s vote.“Here we are being asked again to give them more because they can’t afford this project without more outside money,” said Liz Obradovich, co-owner and general manager of the Holiday Inn Express on Veterans Memorial Parkway. “If they cannot afford it, they should not build it.”Kemmons Wilson is the company behind the Holiday Inn brand, and Obradovich’s hotel won the 2008 Kemmons Wilson Spirit of Family Award, which goes to one Holiday Inn Express each year.Obradovich said she has been in the hotel business since the 1990s and noted that she was offered no economic incentives when the Holiday Inn Express was built less than a decade ago.She said the average occupancy rate for Tuscaloosa hotels is about 65 percent. That level of occupancy will delay the return-on-investment for years to come, she said.“Bigger is not always better,” Obradovich said to the council, “but I am sure you would agree that — in this case — bigger is more costly. Giving more incentives is not the right way to get a downtown hotel built.“If I can build a hotel without any subsidy from the city, they should be able to do the same.” Currently, Kemmons Wilson is compiling documentation of the cost increases at the request of City Hall. The mayor said the information will be vetted with local developers and other experts to determine whether Kemmons Wilson’s assessments are correct.In September, the City Council agreed to a series of rebates that will amount to a maximum of $4 million — or 10 years’ worth of the rebates, whichever comes first — in property and lodging taxes to Wilson Hotel Management Group, a division of Kemmons Wilson Inc. that oversees hotel development and operations.That $4 million in rebates amounts to about 15 percent of the total $27 million in estimated construction costs, and the city anticipates Kemmons Wilson will ask that the city maintain that 15 percent commitment should those costs go higher.Another option is that Kemmons Wilson will request changes to the previously agreed-upon payment schedule of the $1.855 million sale price for the 2.02-acre lot.Initially, the developer had agreed to pay half the amount at the sale’s closing and the other half sometime in the future, based upon the success of the hotel.“We’re trying to negotiate here,” Maddox told the council members prior to the vote, “and we’re at the end of the negotiations, and I need public direction from the City Council in order to complete these negotiations.”Kemmons Wilson has shed no light on what modifications to the incentive package it will be requesting. When asked, a company representative said it was a normal part of the development process.“With any partnership, as you get more details and a deeper understanding of the work required, a good partnership requires good communication and good transparency,” said McLean T. Wilson, vice president of Kemmons Wilson, last week. “We have a great partnership and relationship with the city and, because of that, I do not feel that the project is at any risk.”